Durable Goods Report Rise at Fastest Pace Since Last Year

Durable goods orders rose in February following January’s decline, signaling that firms are starting to invest in equipment.

Orders jumped 3.1 percent in February, according to the U.S. Census Bureau. Orders for nondefense capital goods excluding aircraft, jumped 1.8 percent last month, a key number that economists look at in order to determine business investment. The capital goods orders are typically very volatile. Transportation equipment, also saw a 7.1 percent increase to $83.5 billion.

Economists said the report shows a promising sign of a growing economy. “It tells us that despite what we are seeing in the stock market, business confidence is driving an overall pickup in activity,” said Carl Riccadonna, chief economist with Bloomberg Economics. Riccadonna said President Trump’s tax changes are sure to grow the U.S. and global economy.

Some companies and economists were worried that tariffs could slow investment in coming months. The concern of tariffs look to be tempered by Trump’s recent tax cut.

“This could be a sign that some of the tax changes will drive capital deepening in U.S. and will sow the seeds in lasting rebound in productivity growth,” said Riccadonna.

Orders rose in every major category, minus computers and telecommunications, which shows that Trump’s tariffs have yet to show a damaging effect on companies. But companies may start to feel the pinch the future.

“The tariffs have improved our sales,” said John Orfali, the CEO of Save a Lot Solar, a TKTK. “Customers ask for quotes and are buying before the tariffs kick in, its been really positive.”

Back in January, Trump enacted a 30 percent tariff on imported solar panels. Ofali said at first, he was worried about what the tariffs would mean for his company, but now he feels like they will be able to adjust accordingly.

“When they do it, it will be a negative impact, but not tremendous,” said Ofali. “We’ll increase our prices about 8 percent to 10 percent.”

Overall the increase in the durable goods report is telling the country that the manufacturing sector is doing well. Michael Moran, chief economist with Daiwa Capital Markets said other indicators support that theory.

“Employment in the manufacturing sector was very strong in February and industrial production was robust,” said Moran. “The institute of supply management was solid in both January and February, and today’s number references that view.”

As for what’s in store for next month, the biggest thing to pay attention to are longer-run trends. Right now, the upward increase in capital goods reinforce a positive trend in place.